December 2011
Feature Story

Todd Klemp
Pamela Johnson

Following health care dollars has always been a challenge, especially when there are a lot of regulatory changes, as there have been recently. This article provides the details behind the recently released Centers for Medicare and Medicaid Services physician fee schedule final ruling for 2012. The changes—starting with an across-the-board physician pay cut stemming from the flawed sustainable growth rate formula, revisions to the CMS’ practice expense method, discontinuance of the technical component grandfather, and retraction of the signature rule for diagnostic lab tests—will have an impact on all pathology services.

The CAP continues to defend its members against the CMS targeted reviews of services such as anatomic pathology code 88305, Immunohistochemistry, in situ hybridization, and cytopathology. The CAP developed physician work relative value unit and practice expense recommendations for a majority of the new molecular pathology CPT codes developed by the American Medical Association CPT Molecular Pathology Coding Workgroup and now in the process of being priced within the CMS. The CAP successfully challenged the CMS’ prior decision related to payment of the fine-needle aspirate code values, leading the agency to reverse a previously lower valuation determination. Multiple procedure rules discussed in the final rule may threaten reimbursement for pathologists in the future. In addition, the CMS adopted the CAP’s recommended quality measures for its Physician Quality Reporting System (see story in CAP TODAY next month). Here’s a look at what’s of interest in the physician fee schedule final ruling for next year.

Sustainable growth rate

The 2012 final physician fee schedule rule issued on Nov. 1, 2011 includes a 27.4 percent physician fee schedule reimbursement reduction resulting from the sustainable growth rate formula that Congress and the CMS use as a budgetary tool to control growth in aggregate Medicare expenditures for physician services. Only an act of Congress can avert this reimbursement cut. Congress has acted several times to avoid these types of cuts and is expected to do so again.

The CMS has pledged to work toward a permanent solution to the SGR problem while the CAP, together with the AMA and other specialties, urges the president to repeal the SGR. In its public announcement on this final rule, the CMS said the “Obama administration is committed to fixing the SGR and ensuring these payment cuts do not take effect,” and Eric Cantor (R-Va.) recently said, as have other congressional leaders, he expected the House to act on legislation to change the Medicare payment system for physicians regardless of what happened in the Joint Select Committee on Deficit Reduction. A short-term fix is likely; however, the CAP has been working with the medical community on legislation that would repeal the SGR permanently so future short-term fixes will not be necessary. We believe a permanent solution is on the horizon, but exactly when we will see it and what the result will be are open questions.

Medicare’s 27.4 percent reduction in all services is calculated directly through the change in the conversion factor from 2011 to 2012. The conversion factor for calendar year 2011 was $33.9764 and for 2012 it is $24.6712. The cut will go into effect Jan. 1, 2012 unless Congress acts to avoid it.

Practice expense
transition enters year 3

In 2010, the CMS began to transition the updated practice expense per hour data used in calculating practice expense (PE) relative value units (RVUs) for most specialties. For this update, the CMS used the Physician Practice Information (PPI) survey conducted by the AMA. The PPI survey is a multispecialty, nationally representative practice expense survey of physicians and nonphysician practitioners that uses an instrument and methods highly consistent with those of the Socioeconomic Monitoring System and the supplemental surveys used before 2010. The CMS continues to use supplemental survey data for oncology, clinical laboratories, and independent diagnostic testing facilities. Beginning in 2010, the CMS provided for a four-year transition for the new practice expense RVUs using the updated practice expense/hour data. In 2012, the third year of the four-year transition, PE RVUs are calculated based on a 75 percent/25 percent blend of the new PE RVUs developed using the PPI survey data and the previous PE RVUs based on the SMS and supplemental survey data. This transition will continue to influence the practice expense RVUs for all CPT codes. For 2012, expect mixed results.

Discontinuance of TC grandfather

For 2012 the CMS had proposed ending the provision that allows independent laboratories to bill Medicare for the technical component of surgical pathology services for hospital patients. The CAP opposed the proposal to end the policy; it has long advocated that the grandfather policy should be permanent. The CAP told the CMS that, without this provision, hospitals, especially rural and critical access hospitals, would incur undue administrative cost burdens. There is no duplication in payment for outpatient services because the hospital does not bill Medicare when the independent laboratory bills Medicare. The CMS agreed with the CAP about outpatient services but maintained its stance that there is duplicative payment for the TC of the inpatient stay made to the hospital. The CMS says the duplicative payment occurs to the hospital through the inpatient prospective payment rate when the patient is an inpatient, and to the independent laboratory that bills the Medicare contractor, instead of the hospital, for the technical component service. Absent additional legislation, the final rule reiterates that for services furnished after Dec. 31, 2011, an independent laboratory may not bill a Medicare contractor for the TC of physician pathology services for fee-for-service Medicare beneficiaries who are inpatients or outpatients of a covered hospital. The CAP continues to work with key lawmakers to reverse this decision.

Signature rule retraction

The CAP supported the CMS’ proposed retraction of its policy in the 2011 final rule that requires the signature of a physician or qualified nonphysician practitioner on a requisition for clinical diagnostic laboratory tests paid under the clinical laboratory fee schedule, or CLFS. The CAP worked with the AMA and laboratory groups to seek the reversal of the signature requirement since its inception. The agency acknowledged in a July proposed rule that it examined stakeholder input identifying many situations in which it would be difficult to obtain the physician’s or nonphysician practitioner’s signature on the requisition for clinical diagnostic laboratory tests under the CLFS. The CMS now believes it underestimated the potential impact on beneficiary health and safety.

After considering the public comments it received, the CMS is finalizing its proposal to retract the policy and to reinstate the prior policy that the signature of the physician or nonphysician practitioner is not required on a requisition for a clinical diagnostic laboratory test paid under the CLFS for Medicare purposes.

Misvalued codes and
specific codes for review

Medicare statute requires the review of all relative values at least every five years. Historically, the five-year reviews have included codes the public identified for review, as well as those the CMS and the AMA’s Relative Value Update Committee (RUC) identified. However, more recently the CMS and the AMA RUC have together identified each year, through at least seven methods, a number of potentially misvalued codes. With enactment of health care reform, the CMS is able to expand this effort. In its 2012 rulemaking, the CMS proposed and finalized its misvalued code initiative; its focus is on reviewing the physician work and practice expense RVUs of codes billed by physicians in each specialty that result in the highest Medicare expenditures under the fee schedule. The CMS identified three pathology services representing high Medicare expenditures under the physician fee schedule as potentially overvalued and proposed that the AMA RUC review the codes. These are 88342 Immunohistochemistry, 88112 Cytopath, Cell Enhance Tech, and 88312 Special Stains Group 1. The CAP will work through the RUC Advisory Committee in its role representing pathology as the committee acts on these requests.

Anatomic pathology code 88305 had been identified as potentially misvalued in earlier efforts and, in the 2012 proposed rule, the CMS asked for the review, as soon as possible by the AMA RUC, of both the direct PE inputs that compose the technical component and the physician work RVUs that contribute to the professional component of 88305. However, within its final ruling the CMS agreed with the CAP and others that the RUC reviewed the physician work component recently (April 2010) and that there was no need to revisit the physician work RVU. The CMS believes that a review of the direct practice expense inputs used to calculate the TC “alone is appropriate.” The CAP will continue to develop recommendations for the RUC as it acts on this request.

In October 2009, the RUC identified CPT code 88104 Cytopathology, fluids, washings or brushings, except cervical or vaginal; smears with interpretation as a potentially misvalued code, and the College was directed to review the professional component of 88104, 88106, 88107, and 88108 as a family. Upon subsequent review, the CAP recommended that CPT code 88107 Cytopathology, fluids, washings or brushings, except cervical or vaginal; smears and simple filter preparation with interpretation be deleted because this service is no longer in widespread clinical use.

The CAP deployed an extensive physician survey that led to its recommendation that the work RVUs for the other three codes be maintained at 0.56 RVUs. The RUC reviewed and agreed with the CAP’s recommended values for these services in October 2010 and made recommendations to the CMS in May 2011 for implementation in 2012. In the 2012 final rule the CMS agreed with the RUC recommendations for code 88104 but disagreed with the RUC on codes 88106 and 88108. The CMS calculated interim work values for 88106 and 88108 of 0.37 and 0.44, respectively. It said that after clinical review it believes the value for 88106 overstates the work of the service when compared with 88104, as they have similar intensities and the primary factor distinguishing the work of the two services is the intra-service time. The CMS supported its reduction of 88108 using the same rationale as that for 88106, whereas 88108 has the same intensity as 88106 with more intra-service time. These values are interim for 2012 and subject to comment and refinement before they’re made final in 2013.

In October 2009 the RUC identified the special stains services as potentially misvalued, and the CAP submitted a CPT coding proposal to revise the current descriptors of the special stains services to clarify the appropriate use of these codes. In addition, the CAP conducted a standard RUC survey for each of the special stains services. The survey data demonstrated that the current work associated with these services is accurate, and the RUC agreed. For 2012 the CMS agreed with the CAP-developed RUC’s recommendations for work and practice expense for the special stains codes.

The CMS identified 88112 in the final rule as potentially misvalued as it also represents high expenditure. The CAP has assembled a panel of experts to review the service and take appropriate action.

Finally, both the RUC and the CMS identified 88342 as a potentially misvalued service because neither the RUC nor the original Harvard studies reviewed its professional component. However, the RUC reviewed the direct practice expense inputs in August 2001. The CAP recently advocated at the RUC for the removal of 88342’s review, but in CMS’ proposed and final rulings, 88342 remains on a list of services for physician work and PE review. The CAP will continue to work with the RUC and the CMS on this issue.

In situ hybridization—
88365, 88367, 88368

The CMS had received comment that physicians may be reporting in situ hybridization services (88365–88368) incorrectly where multiple units of each code are reported. The CMS requested that the CAP and RUC review the direct PE inputs and the work values for codes 88365, 88367, and 88368. The CAP commented by clarifying the purpose of the new codes, 88120 and 88121, and urged the CMS to remove the in situ hybridization codes from review. In its final rule, the CMS maintained its request for review of the physician work and practice expense. In addition, the CMS is maintaining work RVUs of 1.20 for CPT code 88120 and 1.00 for CPT code 88121 on an interim final basis for 2012. The CAP is working with the RUC and the CMS to resolve this.

Cytopathology-—88172, 88173, 88177

In February 2010, the CPT Editorial Panel approved the CAP’s recommended revision to CPT code 88172 and created a new code, 88177 Cytopathology, evaluation of fine needle aspirate; immediate cytohistologic study to determine adequacy for diagnosis, each separate additional evaluation episode, same site. Subsequently, the CAP made physician work and practice expense recommendations to the RUC for 88172 and 88177, which were forwarded to the CMS for implementation in 2011.

The CMS then maintained the 2010 work RVU of 0.60 on an interim final basis for 2011. In comments submitted to the agency on the final 2011 physician fee schedule, the CAP requested that the CMS accept the AMA RUC-recommended work RVU of 0.69. The CMS referred the issue to the 2011 multispecialty refinement panel for further review. CAP representatives participated in the refinement panel, which resulted in the CMS increasing the work RVU to 0.69 for code 88172 as a final value for 2012. The CMS also finalized without modification the values for 88173 and 88177 as recommended by the CAP and the RUC for 2011.

Molecular pathology

The AMA CPT Molecular Pathology Coding Workgroup developed more than 100 new codes for CPT 2012. The CAP assisted in this coding effort, and for the majority of the new codes the CAP created physician work RVU and practice expense recommendations for the clinical labor, medical supplies, and equipment items typically used. The RUC and the CAP representatives reviewed and refined these recommendations during two intense meetings in Chicago. The final RUC recommendations were then forwarded to the CMS for its consideration in the 2012 physician fee schedule

However, the CMS did not include RVUs for these new CPT codes in the 2012 physician fee schedule; therefore, they will not be valid for Medicare purposes for 2012. Medicare will continue to require the current “stacking” codes for the reporting of and payment for molecular pathology services. The CAP will continue to advocate for the CMS’ acceptance of the RUC recommendations and the use of these new CPT codes. The CAP continues to work to secure proper Medicare reimbursement for the new molecular pathology codes on the physician fee schedule.

Multiple procedure
payment reduction policies

The CMS had proposed expanding its multiple procedure payment reduction policies in 2012 for imaging services and beginning to explore expanding this policy in the future. For 2012 it had proposed applying a 50 percent reduction to the professional component of all but the highest valued code when more than one procedure on a list of 119 imaging services is performed on the same patient on the same day. In response to comments it received from the AMA RUC and many specialties, the CMS scaled back its proposal. The agency conceded that its own further analysis did not support a 50 percent cut, and the final rule limits to 25 percent the multiple procedure payment reduction on 119 CT, MRI, magnetic resonance angiography, and ultrasound codes.

In addition, the proposed rule included a proposal to examine expanding the multiple procedure payment reduction policies for the technical component of all diagnostic tests. The approach would apply a payment reduction to the TC of the second and subsequent diagnostic tests furnished in the same encounter. Specifically, this approach is based on the assumed efficiencies for multiple units of services due to duplication of clinical labor activities, supplies, and equipment time to about 700 CPT codes.

The CAP is concerned about this approach and commented that pathology services are unique in that the practice expense for anatomic pathology services does implicitly take into account efficiencies already inherent in the TC of pathology services. Therefore, the CAP urged the CMS to remove physician pathology services from any future proposed rulemaking to expand the multiple procedure payment reduction policies. In the CMS final ruling, the agency said it will take the comments into consideration as it develops future proposals. The CAP will monitor this issue.

Related Links

• 2012 national physician fee schedule relative value units Part 1, (PDF, 656 KB)
• 2012 national physician fee schedule relative value units Part 2, (PDF, 588 KB)